Fiscal revenue mobilization and structural transformation in Sub-Saharan Africa: a panel data analysis

Abstract

Achieving structural transformation is central to the Sustainable Development Goals, particularly those related to sustained economic growth, decent work, and reduced inequalities, yet Sub-Saharan Africa continues to grapple with weak diversification and overreliance on primary commodities. Fiscal revenue, as the cornerstone of domestic resource mobilization, has the potential to finance the infrastructure, institutions, and investments necessary for fostering structural change, but empirical evidence on its role in driving manufacturing, industry, and services growth in the region remains limited. In an attempt to fill this gap and provide actionable solutions, the present study investigates the effect of fiscal revenue on structural transformation in 33 SSA countries over the period 2000–2022. Using Driscoll and Kraay alongside IV-GMM estimation techniques, the findings reveal that higher fiscal revenue significantly enhances manufacturing, industry, and services value added. Robustness checks with disaggregated tax measures, additional controls, and the Economic Complexity Index confirm the consistency of the results. Moreover, mediation analyses show that fiscal revenue improves structural transformation not only directly but also indirectly through strengthened control of corruption and greater political stability. Overall, the study provides evidence-based policy recommendations to harness fiscal revenue as a lever for economic diversification and long-term transformation in SSA.